Specifically, the new rules require institutional prime money market funds to float their net asset value, which will allow the daily share price of the funds to fluctuate along with changes in the market-based value of fund assets, essentially breaking the so-called buck, or constant share price of $1.00, that many have come to expect. [New Money Market Fund Rules, a Boon for Ultra-Short-Term ETFs]
The changes “make these money market funds less usable, if not usable at all as investment vehicles,” Maryland treasurer Nancy Kopp said.
Money market fund boards can also impose fees or so-called gates during periods of distress. If a fund’s level of weekly liquid assets dips below 30% of total assets under management, the fund could impose a liquidity fee of up to 2% on all redemptions.
“We’re not really getting paid for the risks associated” and the rules will make these funds even less attractive, Joseph D’Angelo, head of money-market fixed-income at Prudential Investment Management, said in the article.
For more information on money market funds, visit our money markets category.